In our last post we detailed that states with employment most concentrated in production––front-line factory––jobs are all structurally low-prosperity states, with per capita income substantially below the nation’s. Those states include Michigan and Tennessee, both with per capita income twelve percent below the nation’s

Tennessee matters particularly because when it was chosen by Ford for its Blue Oval City electric vehicle automotive manufacturing ecosystem, it became the state that many Michigan political and business leaders put forward as the state Michigan should want to be like economically.

Which raises the question what state economy should Michigan want to be like? Is Tennessee the correct answer to that question?

In the table below we look at economic outcomes for the nation, Michigan, Massachusetts, Minnesota and Tennessee. The first three columns are the economic outcomes we all should want for Michigan: high per capita income, high average hourly wages for private sector employees and a high proportion of adults who are working (employment-population ratio).

If those are the outcomes we want for Michigan, it is clear that Tennessee is the wrong choice as a model for Michigan. Minnesota (chosen by us as a model because it is a non-coastal, cold-weather state) and, even more so, Massachusetts have far better economic well being outcomes. Both are far better choices for the state economy Michigan should want to be like.

As we explored in our last post it was clear to us in 2004 that “knowledge-based industries and young
knowledge workers will be the most important driver of future economic growth. Communities with high concentrations of both will become more prosperous, and communities with low concentrations will become poorer compared with their neighbors.”

You can see how that has played out in the B.A. attainment and high B.A. occupation job share columns in the table below. Unlike Tennessee, Minnesota and, far more so, Massachusetts have excelled at concentrating knowledge-based industries and young knowledge workers. The fact that they are less concentrated in factory jobs has not prevented them from structurally being high-prosperity states.

The reason why Minnesota and, far more so, Massachusetts are high-prosperity states and Michigan and Tennessee are not is that their economies are over concentrated in knowledge-based enterprises and adults with a B.A. or more. The two are inextricably linked. Because the asset that matters most to high-wage, high-growth. knowledge-based enterprises is talent. For Michigan to have the economic well being outcomes of Minnesota and Massachusetts we must make preparing, retaining and attracting talent economic development priority one.

The post Which state economy should Michigan want to be like? appeared first on Michigan Future Inc..

The first post I wrote for this blog was 13 years ago. It was entitled the Need For a New Michigan and made the case that what made us prosperous in the past, won’t in the future. That if we wanted to recreate a high-prosperity Michigan, the state needed a new economic agenda––one that focused on competing in the rising knowledge-based economy, rather than the factory-oriented strategy that had been in place for decades.

Unfortunately everything I wrote in August 2009 I could write today. Only the data needs updating.

The 2009 post ended with a warning: “As long as most Michiganders want political and civic leaders to get their old job back for them –something they can’t do–we are going to continue to decline!”

And decline we have. We detailed that decline in our last three posts. One on the failure of Michigan’s factory-based strategy, one on the failure of the state’s low-tax strategy and one on the out-performance of Minnesota compared to Michigan in both employment and wages.

Minnesota has pursued for decades a public investment in preparing, retaining and attracting talent based economic strategy that we have been recommending Michigan pursue as the most effective way to recreate a high-prosperity Michigan. 630,000 more Michiganders would be working today if the state was doing as well as Minnesota. And the average full-time, year-round worker in Michigan would be earning about $9,000 more if Michigan had average wages equal to Minnesota.

Here is what I wrote in 2009:

Our vision and strategy for growing the Michigan economy is laid out in our New Agenda for A New Michigan report. As I talk to audiences across the state I am constantly reminded that if you don’t understand the need for a new Michigan, the new agenda is irrelevant.

Its clear to me that many – probably most – Michiganders have not accepted that a new Michigan is required. That what made us prosperous in the past, won’t in the future.

Michigan enjoyed high per capita income for most of the last century. As recent as 2000 we were sixteenth in per capita income. Now we are consistently below the national average in both upturns and downturns. In 2007 we were thirty third – 11 percent below the national average. This is the lowest Michigan has been since the federal government started collecting data in 1929.

Why? What made us prosperous for nearly a century––an extraordinarily long run––was good-paying, lower-skills jobs primarily in manufacturing. The hard truth is those jobs are gone forever.

The new reality is that manufacturing (work done in factories) is no longer a sustainable source of high- paid jobs. Nor is it a source of future job growth. Manufacturing makes up about 10 percent of the American workforce today and is declining. Its average wage nationally is about $35,000. Michigan factory work in the future will pay around the national average. So whether it’s traditional Michigan industries like autos and furniture or new industries like alternative energy, factory jobs will not be a source of new high-paid jobs for Michiganders.

Until we understand and embrace that new reality we are not going to work on what really matters to rebuilding a high-prosperity Michigan. As long as most Michiganders want political and civic leaders to get their old job back for them – something they can’t do – we are going to continue to decline!

A recent insightful Politico article demonstrates that this post is as relevant today as it was 13 years ago. The article makes clear that many Michiganders still want their old jobs back (high- wage/extensive-benefits factory jobs).

The assets we need to build to recreate a high-prosperity Michigan with lots of good-paying jobs and careers was clear 16 years ago when we published A New Agenda for a New Michigan. And Minnesota has been working on building those assets for 50 years: education from birth through college and creating places where talent wants to live.

What the Politico article makes clear is that you cannot get to building those assets as long as Michiganders are demanding their elected officials recreate the economy of 1969 when Michigan had the 2nd highest average wages in the country. As long as that is what many, if not most voters, are demanding, we are going to continue pursuing factory jobs first and foremost––even though they are no longer high-wage except for Detroit 3 UAW jobs. And the way we are going to pursue those jobs is with a combination of low taxes and big project-based incentives. Which, of course, makes it impossible to make the public investments in education and placemaking which is what is needed to recreate a high-prosperity Michigan.

Unfortunately our 2009 warning is as relevant today as it was then: As long as most Michiganders want political and civic leaders to get their old job back for them––something they can’t do––we are going to continue to decline!

The post Why Michigan doesn’t pivot to a high-prosperity economic strategy appeared first on Michigan Future Inc..

A year ago Rivian, often described as the Tesla of trucks, announced that they were moving their headquarters from suburban Detroit to Irvine California. The announcement received hardly any Michigan press coverage. And, even more concerning, no reaction from Michigan’s political and business elites.

Two years earlier Amazon announced that, despite big subsidy offers from Detroit and Grand Rapids, no community in Michigan made the final 20 for their 50,000 high-paid jobs Amazon HQ2. That received lots of Michigan press attention for a week or so. And statements of concern by Michigan’s political and business elites. But that too lasted for a short while and then everyone went back to business as usual.

Contrast that to the reaction to Ford’s announcement that it was locating three battery plants and an electric vehicle assembly plant in Tennessee and Kentucky. That announcement generated wall to wall statewide new coverage. And alarm bells sounding from Michigan political and business elites.

That losing Rivian HQ and Amazon HQ2 generated little or no attention and losing the Ford battery plants generated calls from across the political spectrum for the state to spend oodles more in subsidies for the auto companies should not be a surprise. For decades the Michigan economic development playbook has been first and foremost to be competitive with southern states for auto-related factories.

One big problem: that factory-based playbook is decades out of date. The reality is that production jobs (blue collar factory workers) are a declining proportion of the labor market and those jobs now have median wages below the state median for all workers. That is true not just in Michigan but in states like Tennessee that we are told is the model Michigan needs to pattern itself after. Michigan’s factory–based economic development strategy leads to Michigan permanently being a low-prosperity state.

The reality is the high-growth, high-wage segment of the American economy is represented by the Rivian headquarters and Amazon HQ2. The American mass middle class is now dominated by professionals and manager, not by factory workers. Michigan can only return to being a high-prosperity state, a status it enjoyed for most of the 20th century, if it adopts a knowledge-based economic development strategy.

The factory-based economic development playbook is dominated by low taxes, particularly low business taxes, and big subsidies to companies for each factory located or expanded in your state. The knowledge-based economic development playbook is anchored by public investments in education from birth through college and creating places where mobile talent want to live and work.

For years we have suggested that Michigan model its economic development strategy on Minnesota’s approach to economic policy. Minnesota is the Great Lakes most prosperous state. Minnesota has been, for decades, at the leading edge of developing and deploying a knowledge-based economic development playbook.

When you look at the economic well being of workers in Tennessee and Minnesota you see clearly that the path to prosperity is in retaining and attracting enterprises like Amazon HQ2 and Rivian HQ.

Minnesota has a much higher median hourly wage than Tennessee: $22.41 vs. $18.00. And a substantially higher employment to population ratio: 65 percent of Minnesotans 16 and older worked in 2020 compared to 56 percent of Tennesseans. So Minnesotans work more and earn more than Tennesseans. That results in employment earnings per capita of $38,133 in Minnesota compared to $31,751 in Tennessee. That differential is the major contributor to Minnesota being 12th in per capita income while Tennessee is 38th.

Production jobs in both Minnesota and Tennessee have median wages below the statewide median: In Minnesota $19.30 compared to $22.41; in Tennessee $17.17 compared to $18.00. In both states production jobs are a declining share of the workforce. Down from 13.0 percent in 2001 to 8.6 percent in 2020 in Tennessee; down from 9.6 percent in 2001 to 7.6 percent in 2020 in Minnesota.

The exact opposite is true for the core occupations at enterprises like Amazon HQ2 and Rivian HQ: management, computers and math, architects and engineers, and scientists. Median hourly wages in those occupations in Minnesota range from $53.61 in management to $34.77 for scientists; from $42.79 in management to $29.89 for scientists in Tennessee. And the share of jobs in those occupation groups combined have been growing in both states: Up from 9.5 percent in 2001 to 10.7 percent in 2020 in Tennessee; up from 9.8 percent in 2001 to 11.9 percent in 2020 in Minnesota.

The path to prosperity is for Michigan to become more like Minnesota, not Tennessee. To do that requires making preparing, retaining and attracting talent THE economic development priority. The path to a high-prosperity is anchored by Michigan shifting from an emphasis on being a low-cost/high business subsidy state to a state that develops, retains and attracts human capital as its core strategy for economic success.

The post Rivian HQ and Amazon HQ2 are the path to prosperity appeared first on Michigan Future Inc..

Federal Reserve Chair Jerome Powell made clear in recent Congressional testimony that a strong safety net is the not the cause of the decline in labor force participation. In a terrific article about Powell’s testimony, the Washington Post writes:

U.S. senators asked Federal Reserve Chair Jerome H. Powell about labor force participation this week, especially after Powell said getting more people into the job market is a “national priority.”

In response, Powell told senators to blame the education system and the opioids epidemic, not welfare.

“It isn’t better or more comfortable to be poor and on public
benefits now, it’s actually worse than it was,” Powell said.

… “It’s very hard to make that connection, and I’ll tell you why,”
Powell told (Senator John) Kennedy. “If you look in real terms, adjusted for inflation, at the benefits that people get, they’ve actually declined,
during this period of declining labor force participation.”

Powell’s assessment is aligned with the lessons we have learned from Minnesota, the Great Lakes’ most prosperous state. That there is little or no evidence that a too-generous safety net is a prime reason for Michigan being a national laggard in the proportion of adults working.

Summarizing his findings on the topic, from our How Minnesota’s Tax, Spending and Social Policies Help It Achieve the Best Economy Among Great Lakes States report, Rick Haglund writes:

Many states have cut benefits to the poor and unemployed in the belief that these payments dissuade people from looking for paid work.

Minnesota takes a different view. It has created one of the strongest safety nets in the country, spending generously on benefits to help those who have lost jobs or been stricken by poverty get back on their feet.

That protective net has not trapped Minnesotans and turned them into a bunch of government-dependent slackers. Far from it.

Minnesota’s employment-to-population ratio of 67.2 percent in April was the fourth highest in the country, according to the latest data of the Brookings Institution’s Hamilton Project.

In Michigan, which has trimmed welfare and unemployment benefits, 56 percent of the adult population was working in April. Michigan ranked 41^st in that measure.

The data in Rick’s report is from 2014. In 2018 Michigan ranked 38th in the proportion of those 16 and older who worked. Minnesota ranked 3rd. If the same proportion of Michiganders worked as Minnesotans there would have been 725,000 more Michiganders working pre-pandemic. So much for a strong safety net leads to people preferring public benefits over working.

As Chairman Powell noted we should be serious about getting more Michigan adults into the workforce. My former colleague Patrick Cooney summarized our recommendations on how best to that:

The welfare reforms of the mid 90s were built on this central idea: cash supports would now be temporary, but the government would put more resources into ensuring people had the supports needed to put them on a path towards a family supporting wage.

Michigan’s safety net has failed on both of these fronts. Through policy changes and under investment in the state’s TANF system and unemployment insurance system, a large chunk of out of work Michiganders receive little to no cash assistance, nor do they receive the supports needed to obtain family-supporting work.

Our solution, as detailed in our Sharing prosperity with those not participating in the high-wage knowledge-based economy report, is built around two pillars:

The first pillar is to make it easy for those out of work to receive some form cash assistance. Cutting cash benefits both removes some semblance of stability for poor families, and removes the individual from the system of supports that can help put them on a path to family-supporting work. We should want Michiganders to be able to access benefits, both to provide desperately needed stability, but also to connect parents to valuable work-supports.

This means removing arbitrary lifetime limits on the receipt of cash assistance, increasing the generosity of cash benefits in both our welfare and unemployment insurance system, and using TANF dollars for core TANF purposes (cash assistance, work-related supports, and childcare assistance), rather than using the funds to plug holes elsewhere in the state budget.

Paired with a more generous safety net, the second pillar of our plan is to dramatically increase the supports individuals receive to get on the path towards family-supporting work. Our proposed approach is based on a 2014 House Budget Committee report by Paul Ryan titled Expanding Opportunity in America. In the report Ryan describes a system in which all supports would revolve around a central caseworker who would refer clients to a range of service providers, help them navigate a thicket of services and benefits, and recommend potential educational and job placement pathways.

This approach offers the flexibility to offer comprehensive and customizable supports to a range of individuals – from those facing multiple barriers to employment to those that are just temporarily out of a job – and has the potential to support individuals not just into a first job, but through multiple steps on the path to family supporting work. In a hypothetical case Ryan presents, a case manager guides a client from an entry-level retail job all the way through to college graduation and a full-time teaching position. Safety net benefits continue until the recipient is in stable good-paying employment.

The post Jerome Powell on the safety net and work appeared first on Michigan Future Inc..

Dug Song, co-founder and general manager of Duo Security, in an interview with Crain’s Detroit Business, makes the case for higher Michigan taxes. Higher Michigan taxes to invest in education and transit. The two assets that Song believes Michigan needs most to be competitive for companies like his.

Crain’s writes:

Top of mind for the 44-year-old entrepreneur: the state’s struggling K-12
education system, the region’s lack of integrated mass transit and a
culture that he says inhibits a more robust startup community in the
metro Detroit area and the broader state.

Song is on record about his support of higher taxes to pay for some of
these items.

He points to Minnesota as a state that he believes gets it right when it
comes to funding education and infrastructure, while still being a
friendly state for big business.

“And yes, that takes taxes. And you know what? None of those Fortune
100 [Minnesota] headquartered businesses care,” Song said. “They love
it, right, because it’s great if you’re trying to hire people with families. It’s a huge opportunity. I mean, Minneapolis is an amazing city, right? We
just need to take care of our physical environment and take care of our
people and we’ll be good.”

Like Song, we at Michigan Future have long argued that Minnesota and metro Minneapolis provide the economic playbook Michigan should be using. Why? Because they are the Great Lakes best on all economic well being measures.

As Song notes, at the core of the Minnesota and metro Minneapolis playbooks is investing in and paying for education from birth through college and in creating places where people want to live and work: providing 21st Century infrastructure; quality basic services; and amenities.

This is the basic message that Amazon delivered in their HQ2 location search. Talent and transit matter most. (As we explored in a blog entitled No talent, no transit, no Amazon.)

Like Amazon, Song is someone we need to be learning from about what it means for a state and region to be competitive. He is making decisions about where to locate high-wage jobs. In his Crain’s interview he reveals that Duo Security, although an Ann Arbor started and based enterprise, is now expanding most in Austin Texas.

Part of the reason for Austin, not Ann Arbor, is the anti-growth mentality of Ann Arbor policymakers.

The challenge with Ann Arbor, Song said, is a dearth of commercial office space and a governing mentality that the entrepreneur views as adverse to growth.

“Yes, we could have found more space in Ann Arbor, but Ann Arbor is not a city built for growth, and right now it’s dominated by the City Council that doesn’t understand how to do that right,” Song told Crain’s in an interview late last month.

“It’s a problem, and so we decided to move down to Austin just because they are building up. They’ve got room, they have a startup community to draw from. It’s been great.”

But the larger problem, as Song lays out in the Crain’s article, is a state and region that don’t understand that this is a talent-driven economy. That talent attracts capital, not the other way around. So the places that are creating, retaining and attracting high-wage jobs are those that have made preparing, retaining and attracting talent the core of their economic development strategy.

It is far past time for Ann Arbor, metro Detroit and the state of Michigan to learn the lessons of Amazon HQ2 and Duo Security.

The post The competitiveness case for higher Michigan taxes appeared first on Michigan Future Inc..

When its comes to wages and benefits Michigan used to be among the top states. No more. The state has fallen from 8th in 1990 to 21st in 2018. Michigan has gone from $3,743 above the nation on average compensation to $4,416 below in inflation adjusted dollars.

The table at the end of this post displays average compensation for the nation, Michigan, Minnesota and Massachusetts. As well as for the counties with the principal city in each of those state. The data analysis was done by Don Grimes.

The data comes from the BEA count of wage and salary employment, which includes military and farm wage and salary employment. The data also include information on average compensation per wage and salary worker. Compensation is the sum of wages and salaries and benefits paid by employers. Benefits paid by employers include government social insurance payments, like social security and unemployment insurance, and payments by employers into health and retirement funds. Neither measure includes data on proprietor’s (self-employment) employment or earnings.

Minnesota and metro Minneapolis are the comparisons we have been using for decades because they have the best economic outcomes in the Great Lakes taking both weather and we can’t be like the coasts off the table. But if you want to compare Michigan to the best in the nation, Massachusetts and metro Boston are really the better comparison.

Minnesota in 1990 had average compensation $5,419 below Michigan. In 2018 it is $3,229 above Michigan. The story is even more dramatic for Massachusetts: from $1,543 above Michigan’s in 1990 to $19,986 above in 2018.

The Michigan Future explanation of the path to prosperity in an economy being transformed by globalization and technology was first laid out in our 2004 report A New Path To Prosperity? Manufacturing and Knowledge-based Industries as Drivers of Economic Growth. We identified that the most prosperous non-energy driven states had four characteristics in common:

• A high-proportion of adults with a four-year degree or more
• An over concentration in knowledge-based services: health care; education; professional and business services; finance and insurance; information; and corporate headquarters
• A even higher concentration of both in the state’s big metro(s)
• A high proportion of adults with a four-year degree or more in those metros principal city

Minnesota and, even more so, Massachusetts share these characteristics. Michigan does not. The same is true for metro Minneapolis and, even more so, metro Boston. As you can see in the table at the end of this post a lot of Minnesota’s and Massachusetts out performance compared to the U.S. and Michigan can be explained by the robust gains in the counties that include Minneapolis and Boston.

The same basic story of wages and benefits falling behind holds true for Wayne and Kent counties. Wayne County, which includes the city of Detroit, had average compensation in 1990 $10,333 above the national average, in 2018 it was $4,417 above. Kent County, which includes the city of Grand Rapids, had average compensation in 1990 $658 below the national average, in 2018 it was $9,612 below.

All of these data are consistent with the story Eduardo Porter tells in his New York Times story Tech is splitting the U.S. work force in two. Porter details how the American economy is dividing into those who work in low-wage services and those who work in high-wage services. What distinguishes Massachusetts and Minnesota and their big metros from Michigan and its big metros is Massachusetts and Minnesota, largely because of high concentrations of college graduates in their big metros, has more of the fast-growing and high-wage knowledge-based services than does Michigan.

The post Michigan falling behind on wages and benefits appeared first on Michigan Future Inc..

In an article for the Atlantic Seattle entrepreneur and venture capitalist Nick Hanauer writes: “Like many rich Americans, I used to think educational investment could heal the country’s ills—but I was wrong. Fighting inequality must come first.”

Hanauer, as we explored in a previous post, is decidedly left of center. His politics are pro capitalism and pro shared prosperity. He wants an American capitalism that as the economy grows benefits all. Has a broad middle class.

Hanauer makes two essential points in the article. First, and most importantly, is that the main cause of too many Americans struggling in a strong economy is that the economy is creating too many low-wage jobs. That there simply are not enough good-paying jobs that require post secondary skills/credentials to have an economy as it grows that benefits all. He writes:

… The job categories that are growing fastest, moreover, don’t generally require a college diploma, let alone a STEM degree. According to federal estimates, four of the five occupational categories projected to add the most jobs to the economy over the next five years are among the lowest-paying jobs: “food preparation and serving” ($19,130 in average annual earnings), “personal care and service” ($21,260), “sales and related” ($25,360), and “health-care support” ($26,440). And while the number of jobs that require a post-secondary education is expected to increase slightly faster than the number that don’t, the latter group is expected to dominate the job market for decades to come. In October 2018 there were 1 million more job openings than job seekers in the U.S. Even if all of these unfilled jobs were in STEM professions at the top of the pay scale, they would be little help to most of the 141 million American workers in the bottom nine income deciles.

His second essential point is that the single most effective way to improve education attainment is higher household income. He writes:

Multiple studies have found that only about 20 percent of student outcomes can be attributed to schooling, whereas about 60 percent are explained by family circumstances—most significantly, income. Now consider that, nationwide, just over half of today’s public-school students qualify for free or reduced-price school lunches, up from 38 percent in 2000. Surely if American students are lagging in the literacy, numeracy, and problem solving skills our modern economy demands, household income deserves most of the blame—not teachers or their unions.

Hanuer doesn’t believe that improving education is unimportant. He writes: “Make no mistake: Education is an unalloyed good. We should advocate for more of it, so long as it’s of high quality.” But, he continues “the longer we pretend that education is the answer to economic inequality, the harder it will be to escape our new Gilded Age.”

In many ways Hanauer’s evolution away from improving education attainment as the key to shared prosperity to an understanding that the key to shared prosperity are policies directly designed to raise the wages and benefits of those in jobs that do not pay family-sustaining wages mirrors the learning about the economy of Michigan Future.

We have always been focused on the economic well being of Michigan households. Our definition of economic success has always been a Michigan with a broad middle class. A status we enjoyed for most of the 20th Century but now have lost.

We began our work more that 25 years ago trying to learn what were the common characteristics of the most prosperous states and regions in America. And the primary answer kept coming back that what most characterized them was the proportion of adults with a four-year degree or more. That finding was true a quarter of a century ago and, if anything, it is more true today. By far the most reliable path to prosperity for each of us and for states and regions is college attainment. (You can read a summary of those findings here.)

So for years we recommended making preparing, retaining and attracting talent the state’s economic priority. What we didn’t understand well then––but do now––is that even in the most prosperous states and regions there were lots of households stuck in low-wage work. And that this is structural. No matter how strong the economy, there are going to be too many low-wage jobs.

As an example, Minnesota has, by far, the most prosperous economy in the Great Lakes. But in Minnesota in 2018 46 percent of payroll jobs are in occupations with median wages below the national median of $38,640. In metro Minneapolis––the Great Lakes most prosperous region––39 percent of jobs are in occupations with median wages lower than the national median.

Both are substantially better than the nation, Michigan and our two big metros, but still unacceptably too high. The nation has 51 percent, Michigan 58 percent, metro Detroit 47 percent and metro Grand Rapids 62 percent of their jobs in occupations with median wages below the national median.

So our new state policy agenda, A Path to Good-Paying Careers for All Michiganders, now identifies three levers as what matters most to creating an economy that meets the mission of a rising household income for all: increased education attainment; creating places where people want to live and work; and sharing prosperity with those not participating in the high-wage, high-education attainment knowledge-based economy.

Hanauer gets it right when he concludes:

If we really want to give every American child an honest and equal opportunity to succeed, we must do much more than extend a ladder of opportunity—we must also narrow the distance between the ladder’s rungs. We must invest not only in our children, but in their families and their communities. We must provide high-quality public education, sure, but also high-quality housing, health care, child care, and all the other prerequisites of a secure middle-class life. And most important, if we want to build the sort of prosperous middle-class communities in which great public schools have always thrived, we must pay all our workers, not just software engineers and financiers, a dignified middle class wage.

The post Education is not the key to a broad middle class appeared first on Michigan Future Inc..

Wow! Governor Whitmer’s first budget is a bold new playbook for improving the quality of life and standard of living of Michiganders. At its core it rejects the notion that the lever that matters most to improving the well being of Michiganders is low taxes. That low taxes––combined with minimal regulation––will attract employers who will provide Michigan workers with the pay and benefits needed to pay the bills, save for retirement and the kids education.

That is the basic playbook Michigan has deployed at least since the turn of the century. It hasn’t worked and it won’t in the future. Governor Whitmer, in essence, has proposed a fundamental rewrite of the state’s playbook. One that is public investment based. That the levers that matter most are education and creating places where people want to live and work starting with quality roads.

As we explored in our last post––and as did Chad Livengood in Crain’s Detroit Business––Michigan in 2019 has become structurally a low-prosperity state. Falling from 18th in per capita income in 2000 to 30th in the 2017. Now 10 percent below the national average. This is the first time ever Michigan has been a low-prosperity state with a strong domestic auto industry.

You have already started to hear howls from the supporters of the failed low-tax strategy that the Governor’s proposed gas and business tax increases will destroy jobs. Think again!

Minnesota has the highest overall taxes in the Great Lakes, ranking 43rd in the Tax Foundation 2019 State Business Tax Climate Index. Michigan ranks 13th. When it comes to business taxes the Tax Foundation ranks Minnesota 42nd and Michigan 11th. And yet Minnesota is 3rd nationally in the proportion of working age adults with a job. Michigan is 38th. If the same proportion of Michiganders worked as Minnesotans there would be 725,000 more Michiganders working today.

As we explored its not just employment where Minnesotans are far better off than Michiganders, it is all measure of economic well being. And Minnesotans have enjoyed a stronger recovery from the Great Recession than Michiganders.

So it is clear that higher taxes have not prevented Minnesota from having better economic outcomes. Why? Because the benefits they get from the more expansive public investments they are able to make outweigh the costs of higher taxes.

Michigan’s emphasis on low taxes rather than quality roads and quality schools has left us at or near the bottom in both. The state is now characterized by crumbling roads and deteriorating student outcomes. As Governor Snyder’s 21st Century Infrastructure and Education commissions documented neither can be fixed without substantially increased funding. Combined the two commissions recommended six billion dollars in increased annual spending.

As we wrote in our A Path to Good-paying Careers for all Michiganders: A 21st Century state policy agenda:

The places with the strongest economies are those that combine high quality education systems and high quality of place that retains and attracts mobile talent. Both education and placemaking require public investments. These types of public investments, paid for by our taxes, are the state policy playbook most likely to return Michigan to high prosperity, creating an economy with lots of good-paying jobs.

… That said raising taxes is not our goal. It is a means to making the kind of public investments we think are essential to the goal of good-paying careers for all Michiganders. Getting to the goal is what is important. We are open to any and all ideas on how achieve the goal.

The evidence is clear: high-prosperity states and regions are characterized, first and foremost, by high-quality education and communities where people want to live and work. Governor Whitmer has proposed a bold strategy for making Michigan one of those states. For those who do not support her proposed tax increases now is the time to tell us how you would pay for better education and roads. We should no longer accept policymakers claiming to be in favor of better roads and schools, but not telling us how they are going to pay for those improvements.

The post A bold new Michigan playbook appeared first on Michigan Future Inc..

Misconceptions about poverty and the poor continue to nurture flawed policies. The prevalent myth is that jobs are the silver bullet to defeat poverty. Yes, jobs are necessary for people to improve their lives. But a real job which can support a family is often the last step out of poverty, not the first and only. Prescribing jobs as the panacea for poverty is based on three misconceptions about jobs, access to jobs and people who don’t have jobs.

First, it can’t be just any job. It has to be a job that pays enough to stay above the poverty line. That’s not the kind of job usually available to the poor. As underemployment continues to grow, the working poor can put in 40 hours a week and still fall below the poverty line. It’s getting harder, if not impossible to “pull yourself up by your bootstraps.”

Second, it assumes anyone can access jobs. Many people in Southeast Michigan struggle to access jobs primarily due to outrageously unaffordable auto insurance rates and a lack of adequate public transit. Too many residents are forced to decide between driving illegally or missing work. Many also struggle to compete for life-changing jobs because of lack of access to quality education and training. The result: Too many barriers to access a decent job.

These two misconceptions feed the third, which is the most dangerous and offensive misconception: The poor are lazy. It’s mentally easier and more comfortable for people to believe the poor are the cause of their poverty rather than acknowledge we have a system that caters to the haves and actually prevents many of the have-nots from moving up the social ladder. The all too common belief that laziness causes poverty is exacerbated by housing patterns. People see a concentrated area of poverty, with mostly black residents, and inaccurately conclude that their poverty comes from some common trait, like skin color.

Exactly! With 40 percent of Michigan households unable to pay for basic necessities dealing with this reality should be a state economic priority. And we need a completely new agenda to deal with the problem. Both finding a way to deal with the multiple barriers that face those who are not working. And to deal with way too many jobs that do not provide the pay and benefits needed to be able to pay the bills, save for one’s retirement and for the kids’ education.

What such an agenda should look like is the subject of our report: A Path to Good-paying Careers for all Michiganders: Sharing prosperity with those not participating in the high-wage knowledge-based economy.

We believe that the key is having good-paying jobs and careers for all. Where careers are for forty years, not a first job. The prime focus of economic policy must be helping people have a career of good-paying work.

We agree with President Regan when he said a job is the best social program. To us a good-paying job is the best social program. Except for those retired or unable to work at a good-paying job due to physical or mental disability, the best path to a middle class forty-year career are good-paying jobs.

We do not believe that we have a too generous safety net that discourages people from working. As we documented in our State Policies Matters report Minnesota has a far more generous safety net than Michigan. And it is second in the proportion of those 16 and older working, Michigan is tied for 37th. If the same proportion of Michiganders age 16 and above worked as Minnesotans there would be 725,000 more Michiganders working today.

Our agenda for getting more Michiganders working and to make work pay more for those in low-wage jobs has four core pillars:

• Helping Michiganders get family-supporting employment through a combination of income supports and comprehensive and customized case management. Services could include housing, childcare, transportation, substance abuse support, mental heath, job training, financial education, etc. These services and  income supports should continue beyond a first job.
• Using TANF (Temporary Assistance to Needy Families) funding to help those out of work or underemployed get family supporting jobs. To provide low-income families with a safety net that acts as a trampoline rather than a snare (as described by former Massachusetts Governor William Weld). Michigan instead has been a leader in getting out of the business of providing cash grants or services designed to help people get to self-sufficiency.
• Augmenting wages and benefits through some combination of employer mandates and/or a strengthened safety net. (The employer mandate recommendations are the area where we have the most disagreement among the Michigan Future Board and staff.) But we all recognize that to achieve the goal of getting all Michiganders on the path to good-paying careers that income from work will need to be augmented for many.
• Reforming the criminal justice system: To achieve fewer imprisoned, shorter time spent in prison and barriers to work removed after release by providing alternatives to arrest and prison sentences; shortening sentences and reducing recidivism; and mitigating the negative impacts of incarceration once time has been serve.

The post Warren Evans on attacking poverty appeared first on Michigan Future Inc..

Michigan’s per capita income––in a strong economy with an even stronger domestic auto industry––is 11 percent below the national average. In 2000––the last time Michigan had a strong economy and domestic auto industry––Michigan’s per capita income was one percent below. Maybe most concerning is that the portion of per capita income that comes from wages and employer-paid benefits is now 12 percent below the national average. In 2000 it was one percent above.

Michigan’s per capita income is now more than $3,000 below the nation’s. Its employment earnings per capita is nearly $4,000 below the nation’s

How does Michigan compare to Minnesota–the Great Lakes state with the best economic outcomes? Minnesota’s per capita income in 2017 is five percent above the national average. Employment earnings per capita are nine percent above. The difference is more than $8,000 in per capita income between Michigan and Minnesota, with more than $6,500 of the difference coming from employment earnings per capita.

(You can explore what Minnesota has done to become so successful here. And the metro Minneapolis success recipe here.)

Since our inception more than a quarter of a century ago we have used per capita income as our prime measure of economic well being. It is the most comprehensive measure of income calculated by the statistical agencies of the federal government. It includes more sources of income than that used to calculate median household income for instance. Over the past decade or so we have concentrated more and more on the portion of per capita income that comes from employment earnings (wages, self-employment net earnings and employer paid benefits). The other two major categories of per capita income are government transfer payments and interest, dividends and rent (but not capital gains). Employment earnings represent 63 percent of the nation’s per capita income and for Michigan it is 62 percent.

Employment earnings combine both how many people work and how much they earn in wages and benefits. To us rising employment earnings are the key to our goal of recreating a high-prosperity Michigan. A place with a broad middle class.

That Michigan is now––in a strong economy––12 percent below the national average in employment earnings per capita is evidence that too many Michigan families unable to pay the bills, save for their retirement and the kids education is the preeminent economic challenge of our time. Michigan has both too many adults not working and way too many Michigan workers in low-paid and low-benefit jobs. We need to make dealing with both the state’s economic priorities.

The post Michigan is a low-prosperity state in a strong economy appeared first on Michigan Future Inc..